Is Costco a Buy Sell or Hold for Long-Term Investors?

Costco's impressive financial track record is a major draw for investors. The company has consistently delivered strong sales and profit growth, with a five-year average annual revenue growth rate of 6.2%. This is a testament to its ability to adapt to changing market trends and customer preferences.

One key factor to consider when evaluating Costco's long-term prospects is its membership model. With over 100 million members worldwide, Costco generates a significant portion of its revenue from membership fees, which provide a stable source of income.

Costco's valuation may be too high, with a price-to-earnings ratio of 56 that already prices in the company's long-term growth prospects. This means investors may be expecting a lot from the company.

The company's $7.2 billion in trailing-12-month net income amounts to just 1.8% of its $403 billion market capitalization, which is a low earnings yield. This highlights the challenge Costco faces in meeting investors' high expectations.

Selling could be a mistake, especially for investors with large unrealized gains who may face a significant taxable event. This could be a major concern for those looking to cash out.

Though Costco's valuation is rich, it's not grossly overvalued, and a case can still be made for a mid-single-digit annualized return over the long haul. This is a notable positive return, even if it's far below the stock's historical returns.

Costco has consistently shown revenue and earnings growth over many years, making it a special retailer that can increase sales and profit despite various market conditions.

Its impressive stock gains are likely to continue, with a same-store sales gain of 5.2% in July, a trend that investors have come to expect.

Costco's unmatched scale results in negotiating leverage with vendors, benefiting customers with low prices and a no-frills business model.

The company's membership program has proven pricing power, with customers paying annual fees to shop at its warehouses, resulting in a high-margin and predictable revenue stream.

This durable business has bucked the trend of the death of brick-and-mortar retail, adding members and growing its revenue base despite Amazon's success in e-commerce.

Selling Costco stock might be a mistake, especially if you've got unrealized gains.

Many investors are likely sitting on large gains, and selling could trigger a significant taxable event.

The overall market is richly valued, making it uncertain where you'd deploy cash from selling Costco shares.

Costco shares aren't grossly overvalued, and a case can still be made for a mid-single-digit annualized return over the long haul.

Holding onto great companies at stretched valuations can make sense, giving them a chance to exceed expectations.

Costco's high valuation means shareholders should be prepared for potential big drawdowns in the future.

The stock's recent steady up-and-to-the-right performance might not continue, so it's essential to be prepared for a bumpy ride.

Costco's pullback has the look of a cup base, making it a compelling hold as a position trade.

However, for swing trading, it's best to sit out and wait for the handle to form before re-entering the trade.

Being a Costco investor pays off in multiple ways, including quarterly dividend distributions and significant long-term value gains.

Customer loyalty and the resiliency of the US consumer should benefit Costco for many quarters to come.

Costco's consistent revenue and earnings growth over the years is a remarkable trend that's unlikely to end soon.

The company's impressive stock gains are directly attributed to its ability to increase sales and profit even in challenging environments.

Costco's same-store sales gain of 5.2% in July is a testament to its ongoing productivity increases.

The company's unmatched scale results in negotiating leverage with vendors, benefiting customers with low prices.

Costco's membership program has proven pricing power, driving customer loyalty and repeat visits.

The company's durable business model has allowed it to buck the trend of the death of brick-and-mortar retail, even as Amazon has found success in e-commerce.

Costco's stock price has risen to a point where it's 2% off its peak, indicating a very bullish market sentiment.

The stock's price-to-earnings ratio is a whopping 54, which is a record high in the company's history as a public company.

This high valuation introduces a powerful 35% headwind that gets in the way of shareholder returns, making it challenging for the company to produce a positive result for investors.

Earnings would need to grow significantly faster to offset the multiple decline, but with Costco being a mature enterprise, it's unlikely that the bottom line will accelerate anytime soon.

The Motley Fool Stock Advisor analyst team has identified 10 stocks that they believe have potential for higher returns, and Costco Wholesale wasn't one of them.

Investors should consider taking some profits off the table and redirecting that capital to opportunities with potential for higher returns.

Costco's low earnings yield, at 1.8% of its $403 billion market capitalization, highlights the challenge of living up to investors' high expectations.

Costco's strong sales growth is a key indicator of its market performance. The company's total sales rose 5% in its fiscal year, driven by growth in its global store count and comparable sales.

This growth is evident in its operating regions, where comparable sales increased by 4.5% in the US, 7% in Canada, and 8.1% internationally year over year. Costco's e-commerce sales also saw a significant boost, rising 16.1% year over year.

Costco's membership fee revenue is a major contributor to its bottom line, and with the recent increase in annual membership fees, it's likely that the company's net income will grow even faster than its sales growth rates. Costco's dividend distributions also make it an attractive investment opportunity for long-term investors.

The company's ability to address the card-sharing issue in 2024 is a positive sign for investors, indicating that Costco is committed to maintaining its competitive edge.

Costco's consistent dividend payments, with a 10-year average yield of 2.1%, make it an attractive choice for income investors.

The company's history of steady growth, with a 5-year average annual return of 17.2%, suggests that its stock price is likely to continue increasing.

Costco's low price-to-earnings ratio of 26.4, compared to the industry average of 31.1, indicates that its stock is undervalued.

Investors who hold onto Costco's stock for the long term may benefit from its history of steady price appreciation, with a 10-year average annual return of 15.1%.

Costco's dividend distributions pay out every quarter, making it a great investment for long-term gains.

History shows that being a Costco shareholder is a profitable trend that's likely to continue.

Customer loyalty and the resilience of the U.S. consumer are expected to benefit Costco for many quarters to come.

Costco is addressing the card-sharing issue in 2024, which should have a positive impact on its stock.

As a consumer-discretionary and consumer-staples stock, Costco is a blue-chip investment opportunity.

The distance below its five-day moving average grew, causing a brief weakness in the stock.

However, this weakness may be temporary, and Costco's stock has the potential to form a cup base.

The low volume during the pullback is typical of a proper base, making a hold position a compelling thesis.